Industry Trends

VoIP Industry Trends

The most obvious characteristics and trends underlying the success of the converged services industry include:

• Significant growth of internet and specifically broadband connectivity;
  • Increasing accessible market size for broadband services
  • Increasing growth in the transmission of data traffic via internal company networks and the Internet
• Commercialization of innovations in converged service technologies.
  • Increasing consumer awareness of converged service availability
  • A wider and more relevant selection of product and services
• Increased worldwide telephone density (tele-density) and accessibility arising from technological advances and greater investment in telecommunications infrastructure, including the deployment of wireless networks;
• Continuing deregulation of telecommunication industry;
  • Increasing opportunity through fragmentation of the industry
  • Increasing market size through relaxation of regulatory restrictions globally
  • Declining prices arising from increased competition generated by privatization and deregulation
• Increasing globalization of the world's economies, business competition and workforce mobility
  • Increasing demand for communication services

Internet Industry Trends

The Internet has evolved dramatically over the last several years as a result of several trends affecting the computer and communications industries. These trends include:

• the migration by organizations from proprietary mainframe environments to open systems and distributed computing;
• the emergence of low-cost, high-capacity telecommunications bandwidth;
• the increased use of PC's in the home;
• the growth of commercial on-line services;
• the growth of information, entertainment and commercial applications; and
• an increase in the number and variety of services available on the Internet.

Reliance on the Internet for the transmission of data, applications and electronic commerce is growing among organizations and corporations. As the volume of information available on organization’s computer systems has increased, and the use of data communications has grown as a preferred means of day-to-day communications, these organizations are increasingly seeking a number of geographically dispersed access points to their own networks and to the networks of other organizations.

The number of interconnections that businesses desire to establish with networks, customers, suppliers and affiliates generally has made the development of proprietary access systems on a case-by-case basis costly and time consuming. Increasingly, many organizations are seeking reliable, high-speed and cost-effective means of internetworking by relying on the Internet.

Galaxy believes that as reliance on the Internet for the transmission of data, applications and electronic commerce continues to grow among organizations, these organizations will require reliable, geographically dispersed and competitively priced Internet access and services available on international private networks.

Developments in Internet Telephony

The Internet telephony industry began in 1995, when experienced Internet users began to transfer voice messages from one PC to another. In 1995, VocalTec Communications, Ltd. ("VocalTec") introduced software that allowed PC users to place international calls via the Internet to other PC users for the price of a local call. In its early months, the growth of Internet telephony was constrained due to the poor sound quality of the calls and because calls were mainly limited to those placed from one PC to another.

The poor sound quality of Internet telephony was due to the fact that the Internet was not created to provide for simultaneous voice traffic. Unlike conventional voice communication circuits, in which the entire circuit is reserved for a call, Internet telephony uses packet switching technology, in which voice data is divided into discrete packets that are transmitted over the Internet. These packets must travel through several routers in order to reach their destination, which may cause misrouting, and delays in transmission and reception. The limited capacity of the Internet also restrained the growth rate of Internet telephony.

Recent improvements in technology have overcome many of the initial developmental shortcomings of Internet telephony. New software algorithms have substantially reduced delays and the use of private networks or intranets to transmit calls as an alternative to the public Internet has alleviated capacity problems. The introduction of gateway servers connecting packet-switched data networks such as the Internet to circuit-switched public telephone networks has also improved overall transmission quality. Developments in hardware, software and networks are expected to continue to improve the quality and viability of Internet telephony.

A significant attribute of Internet telephony is the ability to reduce overall transmission costs versus traditional circuit switched networks. Packet switched networks are substantially less expensive to operate than circuit-switched networks because carriers can compress voice traffic and place more calls on a single line. In addition, packet switching avoids international settlement rates, which only apply to interconnection between circuit switched networks. The total cost of an Internet telephone call, for example, is based on the local calls to and from the gateways of the respective ISPs, thereby bypassing the international settlement process. The growth in IP services far outpaces growth in the PSTN market, currently estimated to be growing at a CAGR of 8.3%.